MoveOn.org launched a false TV ad in the districts of several House members, claiming through images and words that President Bush plans to cut Social Security benefits nearly in half. Showing white-haired workers lifting boxes, mopping floors, shoveling and laundering, the ad says “it won’t be long before America introduces the working retirement.”

Actually, Bush has said repeatedly he won’t propose any cuts for those already retired, or near retirement. What MoveOn.org calls “Bush’s planned Social Security benefit cuts” is actually a plan that would hold starting Social Security benefits steady in purchasing power, rather than allowing them to nearly double over the next 75 years as they are projected to do under the current benefit formula. The White House has discussed such a proposal, and may or may not adopt it when the President puts forth a detailed plan expected in late February.

Analysis

MoveOn.org began running the ad Jan. 31 in the districts of House members Allen Boyd (D-FL), Chris Chocola (R-IN), and Jim Gerlach (R-PA), and planned to start running it in Montana Feb. 2 in anticipation of a visit by President Bush following his State of the Union Address.

Announcer: First, someone thought up the working lunch. Then we discovered the working vacation. And now, thanks to George Bush’s planned Social Security benefit cuts of up to 46 percent to pay for private accounts, it won’t be long before America introduces the world to the working retirement.

The ad also appeared on MoveOn’s website , along with a request for donations to finance a $500,000 purchase of airtime.

The ad falsely implies through juxtaposition of words and pictures that Bush could slash benefits by nearly half for current retirees.

It shows a series of melancholy, white-haired workers — all of them apparently age 65 or older — at menial jobs. Meanwhile, an announcer says, “thanks to George Bush’s planned Social Security benefit cuts of up to 46 percent to pay for private accounts, it won’t be long before America introduces the working retirement.”

No Cuts for Current Retirees

In fact, Bush has said over and over he won’t cut benefits for anybody currently getting them, or near retirement. By using images of over-65 workers and using the words “before long,” the ad creates the false impression that Bush’s “cuts” would apply to them, and soon.

Furthermore, Bush hasn’t proposed anything specific, yet. He has said in general that he’ll propose diverting a portion of current Social Security taxes into private accounts for younger workers (which the White House now prefers to call “personal” accounts), to be invested in stock and bond funds. He has also ruled out any increase in Social Security payroll taxes.

The ad refers to a proposal that the White House has said it is considering. That idea would change the formula for setting initial benefits for future retirees, and would have no effect on current retirees. The Washington Post reported Jan. 4 that such a proposal is “likely,” and that hasn’t been denied by the White House.

Wage Indexing vs. Price Indexing

Since 1979, initial Social Security benefits have been pegged to rising wage levels. Because wages rise faster than prices, that means future retirees are scheduled to get benefits with more purchasing power than today’s retirees. According to the Congressional Budget Office, a worker retiring today with average lifetime earnings can expect retirement benefits of just under $14,000 a year, but a similar average worker retiring in 2075 could expect benefits of $26,000 in today’s dollars — nearly double the purchasing power of today’s average retiree.

Replacing wage indexing with price indexing would hold that $14,000 benefit constant, adjusting it only for inflation, so that a worker retiring in 2075 would get a benefit with the same buying power as today’s average retiree. That would more properly be called a “freeze” than a “cut.”

The MoveOn ad would be accurate if it said Bush “is expected to propose holding down the growth of future Social Security benefits,” and if it showed newborns instead of white-haired current retirees.

The fact is, nobody living today would be likely to see the full 46 percent “cut” to which the MoveOn.org ad refers. The holdown in growth would take 70 years to reach that size. The current full retirement age for today’s newborns (and anybody born in 1960 or later) is age 67.

Furthermore, current law will force an actual cut in benefits eventually, under official projections. The Social Security trustees estimate that under current law, without a tax increase, all benefits would have to be cut 27% when the Social Security Trust Fund is exhausted in the year 2042, and would continue to be cut each year thereafter. The Congressional Budget Office has a more optimistic projection, predicting that the trust fund wouldn’t be exhausted until 2052 — ten years later — and that benefits would have to be cut only 22% at first.

Footnote: Proposals to replace wage-indexing for initial retiree benefits should not be confused with the automatic cost-of-living adjustment (COLA). The COLA would not be affected. Once initial benefits are determined, they would continue to be adjusted annually to compensate for rising prices, just as today.

Update: MoveOn.org’s Newspaper Ad

Update, Feb. 2: In a full-page newspaper ad in The New York Times MoveOn.org repeated its misleading claim, saying “Privatization means cuts of up to 46% in guaranteed benefits.” It again failed to mention that the “cuts” would be in projected future growth of benefits, and would take 75 years to reach the 46% figure.

The newspaper ad stuck much closer to fact when it statedthat Social Security “can meet 100% of its obligations for the next 37 years with no changes to the current system, according to the Social Security Administration.” That’s true, though the system will begin to require infusions from general tax revenues after 2018 (or 2020, according to CBO) and those infusions will grow over time. The newspaper ad was also correct when it said “after 2042, the system reports it can pay more than 70% of benefits even if we do absolutely nothing.” The Social Security Administration predicts that the Trust Fund can continue to pay full benefits until 2042 (another 37 years). After that, without additional revenue, benefits would have to be cut to 73 percent of what’s currently promised, just as the newspaper ad says. Benefits would also have to be cut further in each future year, and would decline to 68% of promised benefits by 2078.

Update: MoveOn.org Objects

Also on Feb. 2, MoveOn.org strongly objected to our criticism of their TV ad. Tom Mattzie, the group’s Washington, DC Director, wrote : “President Bush’s plan cuts benefits compared to what workers would receive under current law. This implies very substantial reductions over time. . . . In referring to a cut against scheduled benefit levels, Move-on was using the standard framing for the whole debate.”

Whether that is “standard framing” or not, MoveOn’s TV ad spoke only of “benefit cuts” without making clear that these were cuts “compared to what workers would receive under current law” 75 years from now (assuming taxes are increased to pay for them.) If the ad had made that clear we would not have criticized it so harshly. We still would have noted that benefits promised under current law are projected to nearly double in real, inflation-adjusted dollars by that time – crucial context for understanding the current debate.

Mattzie also accuses us of inconsistency, stating that the MoveOn.org ad refers to “cuts” in the same way that we do later in our article. He points to our statement, for example, that “all benefits would have to be cut 27% when the Social Security Trust Fund is exhausted in the year 2042.” We think that sentence clearly refers to benefits in 2042, not current benefits.

In line with our policy of providing opportunity for rebuttal to those we have criticized, we post the full text of the MoveOn.org rebuttal letter under “supporting documents” at right.

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